ResiFund Founder & Director Matthew Lewison talks about the buoyant economic conditions for residential property and the fund’s performance.
Michael Luu: Today we catch up with the Director and Founder of ResiFund, Matthew Lewison to find out more about how the current economic recovery is benefiting his markets. Hi, Matthew. Welcome back to the network.
Matthew Lewison: Thanks, Mike. It's good to be here.
Michael Luu: How do you think the Australian economy has performed? And what does that mean for the residential property market?
Matthew Lewison: I think it's pretty clear that one of the real drivers of the market right now is cheap money. Low interest rates are affecting the Australian housing market, and doubling up with that is the benefit of the tailwind from the home builder scheme that the government introduced around June last year. So, a lot of pressure on material supply and also labour costs. That's pushing up the cost of building houses. Land is scarce. And it actually is interesting that despite the closed borders limiting, obviously, international migration, Australia's market is actually under-supplied in a lot of places. So, we're seeing very low vacancy rates in a lot of the capital city markets around Australia. That's leading to increasing rents -- not in all capital cities but a lot of them. Increasing rents. We're also seeing the housing market's being really strained in new supply, which is pushing up prices on the market.
Michael Luu: Now to your business. Can you share with us again the story of ResiFund and the aim of the company.
Matthew Lewison: Well, we really set up ResiFund to help people to benefit from the capital growth and rental income that you can achieve from residential property. We know even through the GFC rental income from residential property is one of the most stable sources of income. We've seen it once again through the pandemic as well. While other forms of property saw huge impacts on their income streams, residential property was really robust.
Michael Luu: ResiFund has been in operation for about two years now. Can you talk us through the progress you've made over this period of time.
Matthew Lewison: We've been really pleased with the performance of ResiFund, as I said, through different market conditions than what anybody would have anticipated 18 months ago, and we've still been able to perform really well. One of the things that underpins that is the, I guess, the exceptional stability of residential property as an income stream.
Despite the challenges of 2020, we actually posted more than 10 per cent total returns once again. So, we've got two years of exceeding 10 per cent per annum total returns, and we announced our first distribution in 2020, and we're actually paying an annualised distribution of 3 per cent at the moment, and that's about to kick up. We're forecasting that to go up to 4 per cent in the next quarter. And that's off the back of four assets that we have with 26 tenants spread around Australia. I think about 48 per cent in Melbourne, 30 per cent roughly in Brisbane, and 22 per cent in Perth. So, we're getting the geographic spread.
Michael Luu: Now, let's hone in on your portfolio now. Can you tell us what your gearing is, and the types of properties that you invest in?
Matthew Lewison: Yeah. So, currently our gearing's sitting just under 35 per cent. So, for a residential portfolio, that's obviously quite conservative. Our fund is really designed to generate passive income. That's our goal, to generate passive income for our investors. So, we're going into markets where there's a low vacancy rate and high probability of rental growth. And we've been investing in a range of different assets from single family homes that we're constructing. And where we're looking at those types of properties is generally where we can get into a premium land estate, and there are owner-occupiers constructing large double-storey homes, putting pools in, those sorts of things, where they're really going to lift the established capital benchmark for those suburbs. So, we like to go in to those markets where we can also get discounts on the construction and really deliver it for low market price or below replacement cost. We also have multi-tenancy properties that are generating really strong rental incomes for us. So, a multi-tenancy property is a property where you can have more than one family living in, generally single tenants. So, in one of our buildings in Melbourne we have nine individual tenants in studio apartments, all with a common kitchen. So "co-living" is another term for that type of property. So, we've been buying land and constructing those. We're also looking at opportunities to acquire small townhouse developments where we can add value to the asset. And again, bringing it back to, I guess, one of the foundations of ResiFund, the structure of the fund was always designed to buy, add value, rent out for income, and then duplicate that process. It's a strategy that's worked for really successful Australian property investors for quite a while, as the strong income that you're generating after adding value allows you to, obviously, grow your portfolio much faster than sitting by passively.
Michael Luu: So, how do investors get involved?
Matthew Lewison: We've been independently rated, so you can invest directly through our website, by getting a copy of our product disclosure statement, or we also sit on a range of investment platforms, including InterPrac. So, if you're looking to invest in ResiFund, you can also speak to your advisor.
Michael Luu: Matthew Lewison, thanks for your updates, and congratulations on the two-year anniversary.
Matthew Lewison: Thanks, Mike.